Norway's central bank cut its key policy rate by 25 basis points to 0.75 percent, as expected, and said "the current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the coming year."
Norges Bank has now cut its rate twice this year by a total of 50 basis points following a cut in June when it also warned that it could cut its rate in the second half of this year due to a deterioration in the economic outlook.
In today's statement, central bank Governor Oeystein Olsen said the rate cut was decided because growth prospects had weakened and inflation was expected to decline further.
Norway's economic growth is likely to remain low for longer than expected due to the fall in oil prices in recent months. This will lead to a further decline oil-related investments and lower demand from the petroleum industry in other parts of the economy.
While the depreciation of the krone currency has pushed up inflation, Olsen said low wage growth is keeping down costs and inflation will then subside as the effects of the lower Norwegian crown unwind.
Norway's crown currency normally tracks oil prices and it has been steadily depreciating since last summer when oil prices started to decline.
In response to today's decision by the central bank, the crown plunged to 8.48 to to the U.S. dollar from around 8.27 yesterday to be down 12 percent this year.
Norway's inflation rate rose to 2.0 percent in August from 1.8 percent in July, below the bank's 2.5 percent target.
Norges Bank issued the following statement